MicroRNAs (miRNAs) play critical regulatory roles by acting as sequence specific guide during secondary wall formation in woody and non-woody species. Although thousands of plant miRNAs have been sequenced, there is no comprehensive view of miRNA mediated gene regulatory network to provide profound biological insights into the regulation of xylem development. Herein, we report the involvement of six highly conserved amg-miRNA families (amg-miR166, amg-miR172, amg-miR168, amg-miR159, amg-miR394, and amg-miR156) as the potential regulatory sequences of secondary cell wall biosynthesis. Within this highly conserved amg-miRNA family, only amg-miR166 exhibited strong differences in expression between phloem and xylem tissue. The functional characterization of amg-miR166 targets in various tissues revealed three groups of HD-ZIP III: ATHB8, ATHB15, and REVOLUTA which play pivotal roles in xylem development. Although these three groups vary in their functions, -psRNA target analysis indicated that miRNA target sequences of the nine different members of HD-ZIP III are always conserved. We found that precursor structures of amg-miR166 undergo exhaustive sequence variation even within members of the same family. Gene expression analysis showed three key lignin pathway genes: C4H, CAD, and CCoAOMT were upregulated in compression wood where a cascade of miRNAs was downregulated. This study offers a comprehensive analysis on the involvement of highly conserved miRNAs implicated in the secondary wall formation of woody plants.